In the coordination failure model,we mention sunspots because
A) they influence business cycles.
B) apparently irrelevant events may influence business cycles.
C) in central banker speak, they are synonymous with open market operations.
D) seasonal sunshine has an impact on the business cycle.

Question

Quizplus · Accepted Answer

Sunspots are mentioned in the coordination failure model because they represent apparently irrelevant events that can have an impact on business cycles. The model suggests that coordination failures, resulting from a lack of clear signals about the best course of action, can lead to economic downturns, even in the absence of any underlying economic or financial fundamentals. Sunspots are a particularly vivid example of such events, and they are often used in economic literature to illustrate this phenomenon.

In the Coordination Failure Model,we Mention Sunspots Because